Garmin 2010 Annual Report Download - page 55

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Gai eods edutios to eeue fo epeted futue podut etus ased o Gais histoial
experience.
Trade Accounts Receivable
We sell our products to retailers, wholesalers, and other customers and extend credit based on our
ealuatio of the ustoes fiaial oditio. Potential losses on receivables are dependent on each individual
ustoes fiaial condition. We carry our trade accounts receivable at net realizable value. Typically, our
accounts receivable are collected within 80 days and do not bear interest. We monitor our exposure to losses on
receivables and maintain allowances for potential losses or adjustments. We determine these allowances by (1)
evaluating the aging of our receivables; and (2) reviewing our high-risk customers. Past due receivable balances are
written off when our internal collection efforts have been unsuccessful in collecting the amount due.
Warranties
Gais poduts ae geeall oeed  a aat fo peiods agig fo oe to three years.
Gai aues a aat esee fo estiated osts to poide aat seies. Gais estiate of osts to
service its warranty obligations is based on historical experience and expectation of future conditions. To the
extent Garmin experiences increased warranty claim activity or increased costs associated with servicing those
claims, its warranty accrual will increase, resulting in decreased gross profit.
Inventory
Garmin writes down its inventory for estimated obsolescence or unmarketable inventory equal to the
difference between the cost of inventory and the estimated market value based upon assumptions about future
demand and market conditions. If actual market conditions are less favorable than those projected by
management, additional inventory write-downs may be required.
Investments
Investments are classified as available for sale and recorded at fair value, and unrealized investment gains
ad losses ae efleted i stokholdes euit. Iestet ioe is eoded he eaed, ad apital gais
and losses are recognized when investments are sold. Fair value of investments in auction rate securities are
determined using third party estimates which followed an income approach valuation methodology. Investments
are reviewed periodically to determine if they have suffered an impairment of value that is considered other than
temporary. If investments are determined to be impaired, a capital loss is recognized at the date of
determination.
Testing for impairment of investments requires significant management judgment. The identification of
potentially impaired investments, the determination of their fair value and the assessment of whether any decline
in value is other than temporary are the key judgment elements. The discovery of new information and the
passage of time can significantly change these judgments. Revisions of impairment judgments are made when
new information becomes known, and any resulting impairment adjustments are made at that time. The
economic environment and volatility of securities markets increase the difficulty of determining fair value and
assessing investment impairment.
Income Taxes
Garmin provides deferred tax assets and liabilities based on the difference between the tax basis of assets
and liabilities and their carrying amount for financial reporting purposes as measured by the enacted tax rates and
laws that will be in effect when the differences are expected to reverse. It is Gais poli to eod a aluatio
allowance to reduce its deferred tax assets to an amount that it believes is more likely than not to be realized.
While Garmin has considered future taxable income and ongoing prudent and feasible tax planning strategies in